In the event that the Government of Guyana decides to grant Repsol a fresh prospecting licence, the company could find itself unable to claim its US$500 million in expenses accrued under its previous license as exploration costs. This revelation came from Vice President Dr. Bharrat Jagdeo during his customary weekly press conference on Thursday.
Dr. Jagdeo stated, “As of this moment, the property is back under the ownership of the Government of Guyana. If we choose to proceed in that direction—and no definitive decision has been reached regarding reacquiring the respective area—it would not be a renewed licence but a new licence.”
He further clarified that this new licence would operate under the “new regime,” governed by the recently enacted Petroleum Activities Act and updated Production Sharing Agreements (PSAs). If Repsol proceeds to production under this new licence, the expenses incurred under the new licence would be considered part of the cost back.
Repsol, a Spanish oil company, had held a 10-year prospecting licence for Guyana’s Kanuku block, which expired in May of this year. During this period, Repsol served as the operator of the Kanuku block with a 37.5% working interest, while Tullow Oil held an equivalent 37.5%, and TotalEnergies/Qatar Petroleum (TOQAP) held the remaining 25%.
Dr. Jagdeo underscored that the US$500 million expended by the company during the 10-year licence had effectively been lost due to the expiration of the licence, stating, “So effectively they’ve lost that US$500 million—half a billion dollars in this case. It is not a risk-free activity.”
Last week, Dr. Jagdeo revealed that discussions concerning Repsol’s application for a new licence had not yet taken place, and the decision on licence renewal remained pending at the cabinet level.
He indicated that should the decision lean towards granting the renewal, Repsol would need to adhere to the provisions outlined in the new model Production Sharing Agreements (PSA). These revised PSAs encompass various provisions, including the introduction of a signing bonus for the block, a reduction in the block’s size, and the application of additional conditions, including heightened royalties and fiscal terms.
During last week’s press conference, Vice President Jagdeo also addressed questions regarding Repsol’s determination to secure a licence renewal, despite limited substantial discoveries within the block during the 10-year license period. He emphasized that Repsol may recognize potential discoveries within the block based on the 3D seismic surveys in their possession and the substantial monetary investments made in the area, which they may be hesitant to relinquish.
